Nearly two-thirds (over 50%) of small businesses charge for their apps. This shows the potential for apps to become a major revenue stream. A survey of 529 small businesses found that many small businesses are making money from their apps via in-app purchases and download fees.

Apps enable businesses to have full access to their customers at all times.

Apps can be a great way for small businesses to make revenue and attract new users. It can sometimes be hard to decide the right way to monetize an application.

Small businesses are seeking new ways to generate revenue via their app. Depending on the size of their customers and how they are monetizing, many companies decide to either monetize directly or indirectly.

Over 529 small businesses were surveyed about their use of mobile apps in the U.S. According to the Small Business Administration’s definition, small businesses are those with limited revenues and between 1-5 employees.

Our research shows that small businesses can monetize their apps through app download fees and in-app purchases. They also collect data from their users to improve their services. This article will help you determine the best way for your small business to get the most out of its mobile app.

Our findings

• Only 32% of small business owners have a mobile app, which is a sign that they don’t realize the potential benefits of creating an app.

• Customers pay small businesses for apps via a download fee (25%) or in-app perks, purchases, or subscriptions (34%).

• The number of small businesses that charge their app for more than 50 employees is nearly twice as high (63%) than the 35% who have fewer than 50 employees.

• Nearly half of the small businesses have access to user data via apps, including contact information (47%), payment details (35%), and location (46%), which shows the importance of user data.

Despite the value of mobile apps for customer engagement, only 32% of small businesses have an app

A mere 32% of small businesses have a mobile application, despite their importance in generating revenue and retaining customers.

Apps allow customers to interact with each other, which encourages them to spend more time looking at your content.

Apps are expected to generate $188.9 trillion in revenue by 2020, which shows that app users are willing to pay for their use.

It can be difficult to decide the best way to monetize an app. To determine which plan is best for them, businesses should be familiar with each monetization method.

Apps are more common in small businesses with 50 or fewer employees.

Companies with over 50 employees have more resources and money to promote their apps. This could explain why nearly two-thirds (63%) of companies with more than 50 employees charge an app fee, while only 35% of those with less than 50 employees do so.

This finding appears to contradict the logic that small businesses might need the initial ROI more than large companies that have the financial resources to wait for the right time to see if they are making gains.

Small businesses need to make sure that consumers are aware of the app’s functions before launching it. This will help them convince customers to buy it. Any size business should think carefully about the mobile app monetization model they choose.

To make their mobile app profitable, small businesses rely on in-app purchases and download fees

Two primary methods are used by small businesses to make money from their apps:

• Charges for downloading the app (26%)
• In-app purchases, subscriptions, and perks (37%)

Consumers must feel that the app’s value and worthiness are sufficient to justify paying for it.

Two of the 5 monetization methods that apps businesses commonly use are paying upon download and in-app purchase.

5 App Monetization Strategies

These 5 strategies can help small businesses make more money using their mobile app.

• No cost Model
• Freemium Model
• Subscription Model
• Paid Model
• Paymium Model

1. free Apps can increase brand awareness

Your business will not be charged for the app’s use by consumers thanks to the free app monetization model.

Customers have full access to all features and are eligible for free.

Customers who aren’t sure if they want to pay for an app download the free model.

Joana Kelly, chief operating officer of Small Planet, a mobile app development and design company, said that it is difficult to get people to pay for applications. It’s something about asking for a dollar to download an app that creates a barrier. People will be more likely to try an app if it is free to download.

Before you can make the free app monetization model work, ensure that your app has a strong customer base.

However, many small businesses, particularly those with less than 50 employees, might not be looking for an immediate stream of revenue through their app. Apps can be used by retailers or food companies to increase product sales.

You can also create an app for your business to promote your brand and help you build an audience.

Although the app monetization model is risky for small businesses looking to increase their revenue, they can still use free apps to promote other services or encourage sales.

2. Loyalty customers can be gained with freemium apps

The freemium model for app monetization combines the free model and a premium upsell.

A freemium app offers a basic version of the app that can be downloaded for no cost. If users want to access more features and advanced services, they can purchase a premium version.       

Freemium is based on users being hooked to the platform and want more features. Your app can be successful with the freemium model if it is a success as a free app.

The “5 Percent Rule states that premium users must support 95% of non-paying users.

Companies such as Spotify and Skype have found this model to be very successful.

Small businesses must convince users that their paid apps offer a better experience than the basic version.

DropBox charges users after they exceed the storage limit. Users don’t want to look for a better way to store their content, so they are willing to pay a premium to increase their storage space.

DropBox anticipates what users need and predicts that they will require more storage space. DropBox encouraged users to trust its service and then offered a larger service at a higher price.

A well-established user base is better for freemium. An app with only a few thousand users can’t be supported. The company won’t be able to generate enough revenue to sustain the rest of its business.

Homebase is an online employee scheduling tool that offers a free version but also provides incentives for managers to upgrade.

Ravi Dehar (head of growth at Homebase), stated that “we’ve tried not to overwhelm people with too many upgrades, and we want them to have an amazing experience even when they’re on our free plan.”

Dehar wants customers to take advantage of the free plan and be loyal customers. Dehar wants users to enjoy the free plan and become loyal customers.

Small businesses can benefit from the freemium model for mobile app monetization to generate revenue from initial downloads as well as perks and upgrades later.

3. Subscription App Monetization Model Offers Reliable Revenue Stream

A subscription model is a great way to make your app more profitable.

Subscribers are common for entertainment apps like Netflix, Hulu, or HBO. Subscriptions provide a steady revenue stream to an app because each user pays a set amount each month or year.

Netflix offers, for instance, a multi-tiered subscription plan.

Small businesses have the option to create a tiered subscription model that offers additional features at a higher price.

Hulu, for example, offers a basic package that renews every month. It allows users to stream content but requires them to watch commercials. Hulu Premium offers all content without commercials but is more expensive.

Hulu also offers an “add-on” subscription that allows you to watch specific channels. If users want to see original content from a channel, they will need to subscribe to the “add-on Starz” subscription.

Wave is another example. This small business accounting app supports small businesses by organizing invoices and tracking receipts. It helps businesses analyze their finances better. Wave is a subscription-based app where users pay monthly for payroll tax filings and tax payments.

Subscribers can access uninterrupted services month after month without worrying about any unexpected costs or extra fees.

Subscribers may be motivated to try a service for a month before deciding whether they want to subscribe for the remainder of the year.

Subscription-based apps not only generate reliable revenue but also offer unique content and experiences at a recurring price.

4. Paid Apps Offer Instant ROI

Paid apps are the app monetization model where users pay to download your app. Users can access all the services of the app by paying a one-time fee.

Your company must determine the app’s value and market it effectively, as the user pays only once. Users may not download your app if the price is too high. Your app might not make a profit if it is too expensive.

It can be hard to charge upfront for an app. To convince people to buy the app immediately, your business should create a unique marketing campaign.

Companies with less than 50 employees may find it difficult to dedicate a marketing team exclusively to promoting an app.

Because it is easy to recognize, many gaming apps use the paid app revenue model.

Kelly from Small Planet said, “I think people expect them to pay for gaming applications.” They have entertainment value, where you can spend hours playing the game and doing other things. People expect that a gaming app will have an upfront price.

Paid apps often require that users understand what the app does. An app they don’t know is less likely to get paid for.

The app Life, a board game application, costs $2.99 to download. Most people are familiar enough with Life that the company doesn’t have to do much to get them to download it. Either the user wants to play Life, or he doesn’t.

You can maximize your success with paid app monetization by marketing the following elements:

• Description
• Title
• Images

Paid apps provide immediate financial returns to your business, so it might seem like there’s little risk. There are still challenges in determining the price point of your app, educating users, and converting them to downloads.

5. It may be difficult to implement the Paymium App Monetization model effectively

Paymium apps are based on the assumption that users will pay to download and continue to pay for additional features.

Apps that are paid for require users to pay for the app’s standard services as well as any extra perks.

Angry Bird is a well-known example of a premium app. In the beginning, users had to pay for the game to purchase more lives, hearts, energy, and other resources.

Heads Up, a popular party game that Ellen invented, uses the premium model. This means people must pay to download the app, but they only get a limited number of cards before being able to buy more.

Heads Up believes that players are familiar with the game, and will pay for continued play.

Paymium app monetization may not be a good option for small businesses due to the risk. Paymium is usually successful with content-based apps that offer a steady stream of entertainment for users.

Small Businesses Value App Data

App data can provide valuable insight into customer behavior, such as how customers interact and engage with brands. This data can be used by small businesses to promote their products and services.

Nearly half of all companies collect customer data via apps. This includes contact information (47%), address (46%), and payment details (35%).

Small businesses can use contact information to market to users and inform them about any sales, updates, or discounts.

Location services provide insight into the places people live and visit. Location services can also provide information about users’ socioeconomic status. This allows advertisers to target individuals based on their presumed wealth and lifestyle.

App data can be used by small businesses to help them better understand their customers and create buyer personas. This helps to provide more customized experiences for users.

Ajay Kumar, co-founder, and CEO at TheHouseMonk is a property management solution app. He said that he collects data from apps to determine which features are worth keeping or updating.

“Data allows us to understand what people are using our app, and what they don’t use.” This data helps us to build a better product. We can keep useful features or remove them. Marketing upgrades and feature enhancements are also possible.

The ability to collect user data allows you to get a better picture of who is using your app and when. Users will use the app more often if the experience is better.

App advertising helps businesses make money from app data

Access to user data can be a profit for small businesses.

Apps can track location, monitor activity and collect personal information. This data allows advertisers to target audiences and personalize messaging. This improves sales conversions.

Recent criticisms of companies like Google and Facebook have focused on user privacy violations and sharing data with third parties.

Igor Ishchenko is the chief technology officer at Cruxlab. This web and mobile development company is based in Los Angeles. “But, after the Facebook/Cambridge Analytica scandal, there’s a growing need for privacy. This can be achieved by replacing advertisements with paid features and less tracking.

Some apps, such as Facebook, are expected to be free. This expectation means that apps need to capitalize on the data users give them. Facebook has faced backlash over its data collection and the people they give it to.

Small businesses use consumer data to improve services

Many small businesses don’t believe in selling user data to make a profit.

Small business owners feel that ads can interrupt the user experience, which discourages them from returning to their apps.

Selling information could conflict with the interests of the user. This is against some companies’ missions.

Omer Yarkowich is vice president of product marketing and product development at MyPrivacy. This privacy cleaner app, based in Israel, said that “offering ads within the app puts us into a potential conflict-of-interest with our users.” To maximize the revenue from ads, we would have to use what we know about our users. This is against our values and mission statement.

App developers can provide a better experience for users if they are aware of what people use and like.

Companies understand the importance of knowing more about their customers. People love personalized content. They feel more connected to businesses that understand their interests.

Monetize Your App Effectively

Mobile apps can be used by small businesses to generate revenue via direct or indirect means.

A third (34%) of small businesses charge in-app purchase fees, while 25% charge a fee for the app’s download. The key to an app’s success is choosing the right monetization model.

Companies with 50 or more employees will likely charge for their app. However, businesses with fewer employees rely on paid app monetization to generate immediate revenue.

Small businesses recognize the importance of app data to improve customer experience and show advertisers the app’s worth.

As they seek to grow their reach and increase profits, small businesses continue to invest heavily in apps.